Ally Financial posted $104 million in net income in the fourth quarter of 2013. The company saw its bottom line drop 93 percent year-on-year in the fourth quarter of 2012, although the results in the year ago period were boosted by international operations that were already sold mostly to GM and by a one-time tax benefit.
Ally's auto finance business logged an 18-percent fall in pretax income in the fourth quarter of 2013 to $305 million, excluding $98 million in pretax charge related to a settlement reached by Ally, the Consumer Financial Protection Bureau (CFPB) and the United States Department of Justice.
If the one-time charge was included, Ally’s auto finance ops would have posted a 44-percent dive in pretax income to $207 million. Ally disclosed that its preferred-lender relationship with General Motors, which was set to expire Dec. 31, was extended while they negotiate a new agreement.
"The last several years have been years of significant transformation," remarked Ally chief executive Michael Carpenter. "We're happy to have a lot of that in the rearview mirror." In December, the CFPB disclosed that Ally allowed discrimination by letting dealerships set their own rate for dealer reserve, which is interest dealerships could add as their compensation for originating finance contracts.
The CFPB is trying to have lenders switch to flat fees or some other form of dealer compensation. The CFPB discovered that dealerships in Ally's network have charged higher amounts of dealer reserve for minority groups compared with "similarly situated" borrowers who were not minorities. While Ally denied tolerating discrimination, it accepted the settlement.